News Brief: IMF Completes Third Review of Cambodia's PRGF Program and Approves US$10.5 Million Credit
July 18, 2001
The Executive Board of the International Monetary Fund (IMF) today completed the third review of Cambodia's performance under a three-year Poverty Reduction and Growth Facility (PRGF)1 (see Press Release No. 99/51). The Board also approved the release of a further SDR 8.357 million (about US$10.5 million) from the arrangement, which would bring total disbursements under the IMF-supported program to SDR 33.428 million (about US$41.8 million).
After the IMF Executive Board's discussion on Cambodia, Eduardo Aninat, Deputy Managing Director, made the following statement:"Cambodia has continued to make good progress in the implementation of its economic reform program. Inflation has remained low, economic growth has been sustained, budgetary performance has improved, and the external position has strengthened. Progress has also been made in important areas of structural reform including bank restructuring, adoption of a Governance Action Plan, implementation of a pilot military demobilization program, and computerization of the civil service census. However, as the reform agenda remains large, to achieve poverty reduction objectives, further strong efforts will be needed to sustain macroeconomic stability and make up for delays experienced in several important areas of structural reform.
"The program for the remainder of 2001 provides a coherent framework for pursuing growth and poverty reduction objectives. Further efforts to improve revenue mobilization—including a strengthening of customs and tax administration—and to increase the efficiency of expenditure management will be important to meet program targets for 2001, and to set the stage for more fundamental progress toward medium-term objectives in 2002. Prudent monetary and exchange rate policies will continue to be needed, supported by avoidance of domestic financing of the budget."Several areas of structural reform remain key to sustaining the recent track record of improved economic performance. These include bank restructuring, implementation of the full military demobilization program, civil service reform, revisions to investment incentives, legal and judicial reform, and further improvements in public expenditure management.
"The government's poverty reduction and economic reform program will continue to depend on substantial donor support, and continued successful implementation will require close monitoring. Prudent external debt management will be required, including the avoidance of nonconcessional borrowing, and efforts to complete outstanding debt rescheduling agreements. The achievement of program objectives will depend on the authorities' ability to make effective use of donor assistance, including comprehensive technical assistance being provided to improve local capacity in bank supervision, tax and customs administration, and budget management," Mr. Aninat said.
1 On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility, was renamed the Poverty Reduction and Growth Facility, and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 ½-year grace period on principal payments.